Carnival Corporation & plc's (NYSE:CCL) Price Is Right But Growth Is Lacking

When you see that almost half of the companies in the Hospitality industry in the United States have price-to-sales ratios (or "P/S") above 1.3x, Carnival Corporation & plc (NYSE:CCL) looks to be giving off some buy signals with its 0.8x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Carnival Corporation &

What Does Carnival Corporation &'s Recent Performance Look Like?

Carnival Corporation & certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Keen to find out how analysts think Carnival Corporation &'s future stacks up against the industry? In that case, our free report is a great place to start.

How Is Carnival Corporation &'s Revenue Growth Trending?

Carnival Corporation &'s P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 51% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 5.8% per year over the next three years. That's shaping up to be materially lower than the 11% per year growth forecast for the broader industry.

With this information, we can see why Carnival Corporation & is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Carnival Corporation & maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

It is also worth noting that we have found 3 warning signs for Carnival Corporation & (1 makes us a bit uncomfortable!) that you need to take into consideration.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.